Investing As A Lottery Winner
People who win the lottery often claim that it was the worst thing that has ever happened to them, and they end up bankrupt after a couple of years.The reason for this is that they do not know how to manage their money, and they are given a huge sum of it all at once.Another reason that they end up bankrupt is that they end up with "friends" who want them to "invest" in the next greatest idea next to slice bread.Those "investments" turn out to be duds at best and fraudulent at worst.
The best thing for them to do would be to hire a credible financial advisor to help them with the new found wealth.People who have been poor or even in the middle class for their entire lives have not learned the way to invest large sums of money in such a way that they can get it to work for them.Instead, they look at all of the money and decide that they can live the lifestyles of the rich and the famous.They begin to make luxury car purchases, take extravagant vacations, and waste their money in a million ways without ever realizing that there will be an end.
To someone living on $40,000 or $50,000 a year, even a small sum like a million seems unimaginable, and it is through that nebulousness that the lottery winner tries to get a handle on the recently gained riches.
Invested in the most secure way at two percent interest, a million dollars should be able to bring in a minimum of $20,000 a year, which for a working family is a huge sum.Unfortunately, it isn't the life changing sum that some would like to think it is, especially if the family stops working and starts spending like a money making machine.
Riskier investments may bring in a higher sum of money, but it may be difficult for a new to the wealth person to be able to differentiate between a risky investment that is good and a bad risk for investing.That is where a financial consultant can come into play.Having someone who is an expert in the field does not guarantee successful investing, but it can even out the odds.
The smart lottery winner will find a way to balance the urge to live wealthy and keeping the same standard of living.Rather than buying a new, larger home, maybe the lottery winner pays off his or her current mortgage.This may be a problem if the lottery winner finds people with investment opportunities on the doorstep every day.In that case, finding a modestly priced home is a good idea.
Keeping the old car or upgrading to a slightly better vehicle can also be a good way to strike a balance.Given the right circumstances, a new car can certainly make a lot of sense as long as it is not more than what the person needs.
The problem is that people equate winning the lottery with wealth, but wealth generates wealth, and the lottery is just a one shot lump sum paid out over 20 years.What happens after the 20 years is over may not even come into question if the lottery winner generates enough unpaid bills.
The lottery isn't the only way that people come suddenly into a lot of money.An inheritance may be unexpected as well.Keeping that in mind, those who come into a lot of money and don't know how to manage it should seek help.Finding a professional money manager who is trustworthy can save a lot of headaches.